Surety Bond Guarantee Program:

Small Business Administration's Actions on Prior Program Recommendations

RCED-86-183BR: Published: Sep 18, 1986. Publicly Released: Sep 18, 1986.

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In response to congressional requests, GAO reviewed the Small Business Administration's (SBA) management of its Surety Bond Guarantee Program to determine whether SBA implemented GAO and SBA Inspector General recommendations for improved program management. The recommendations focused on SBA underwriting and claims processes and on its automated program information system.

SBA established the Surety Bond Guarantee Program in 1971 to guarantee up to 90 percent of a surety company's losses on bonds issued to small businesses unable to obtain bonding without the guarantee. GAO found that SBA: (1) has prepared underwriting guidelines, revised its default/claim form, developed a procedure to calculate a loss ratio comparable to that of the private sector, and provided training to its permanent employees; (2) is in the process of making its automated reporting system fully operational, developing a surety handbook, and incorporating the concept of a guarantee fee schedule in its proposed program rules; (3) has not implemented recommendations related to the establishment of rates and fees because its concern in cost control matters is the surety's bottom-line loss rate; and (4) has not implemented several other recommendations because they are similar to actions already occurring, they are not practical, or budget constraints prevent implementation.

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